There has been a lot of change in the e-book publishing world of late, so I thought it a good idea to update you on what is going on at Macmillan.
Translation: It will be easier to accept the bad news if I warn you first.The largest single change happens today, December 18th. Today a portion of our agreement with the Department of Justice (called a consent decree) expires, and we will no longer be required to allow retailers to discount e-books.
Translation: Remember when we illegally colluded with other publishers to price-fix? We did that because we were worried that low-priced ebooks would harm our paper distribution oligopoly.

It doesn't matter that we have a much higher profit margin on ebooks. It doesn't matter that since forcing the agency model on Amazon, our authors made less money. What matters is that we foresaw a day where ebook sales surpassed paper sales, and we knew that would put us out of business because savvy authors wouldn't need our value-added publishing services anymore.

Happily, Amazon won't be able to discount our ebooks anymore, so we can charge high prices and protect the interests of our business and of the cartel at the expense of your financial situation.

Unless you're one of the huge bestsellers we publish. Those huge bestsellers sell a shit-ton of paper books. Under this model, they'll continue to get richer.

Unfortunately, the court in the Apple case made matters more complex. In a judgment against Apple, the court determined that publishers would be required to allow Apple unlimited discounting, and for a period that extends beyond the court approved consent decrees. Different time periods were assigned to different publishers. This will ensure a muddled and inefficient market until October 5, 2017 when Macmillan’s term (the last publisher) expires.
Translation: Unfortunately Apple, the company we colluded with, can still discount us. Whoops. So we don't have total control over the industry like we want, even if total control hurts the sales of your titles.Simon & Schuster and Macmillan have appealed the court’s decision to extend these dates. This appeal still awaits resolution.
Translation: Money that could have been given to you in the form of higher ebook royalties has been given to lawyers. But the lawyers will hopefully help us ensure that your ebook sales remain low. So why should a low royalty even matter to you? It's not as if your ebooks are priced to sell in the first place.

Late last week Macmillan reached an agreement with Amazon on a multiyear deal for print books as well as a multiyear deal on the agency model for e-books, starting on January 5, 2015. All our other retailers will also be on the agency model, leaving Apple as the only retailer who is allowed unlimited discounting.
Translation: We're taking a similar deal to what S&S and Hachette took. We want Amazon to discount print books, because they essentially are subsidizing our continued existence. That shouldn't matter to most of you, because paper distribution is slowly dwindling except for major bestsellers. What should matter to you--ebooks--won't be discounted. This is our longterm strategy to stay relevant.Irony prospers in the digital age.
Translation: We kinda screwed ourselves.

This odd aberration in the market will cause us to occasionally change the digital list price of your books in what may seem to be random fashion. I ask for your forbearance. We will be attempting to create even pricing as best we can.
Translation: We are attempting to create even pricing with ebooks. With paper, we want Amazon to discount them as much as possible. We're okay with Amazon undercutting the competition on the price of paper books. That's a monopoly we want them to have, even if it hurts B&N and indie bookstores. But with ebooks, because we have no distribution oligopoly and are technically not needed by authors, we insist on controlling prices.

Under our deal with Amazon your net percentage of the proceeds will not change. You will be affected, as you always have been, by our changes in price. Your books will continue to be featured in Amazon promotions and deals.
Translation: We're warning you that you're going to earn less. If we thought you'd be earning more, we wouldn't be asking for your forbearance.

In reaching agreement with Amazon, we have not addressed one of the big problems in the digital marketplace. Through great innovation and prodigious amounts of risk and hard work, Amazon holds a 64% market share of Macmillan’s e-book business. As publishers, authors, illustrators, and agents, we need broader channels to reach our readers.
Translation: Rather than properly exploit that 64% market share by pricing ebooks appropriately, which is what customers want, we'd prefer Amazon to have more competition so we can price books how we want to price them. Hardcovers command a luxury price, and for years readers had no choice, and those are the days we want to return to. Rather than adapt to the market, we want the market to adapt to us.

In our search for new routes to market, we have been considering alternative business models including the subscription model. Many of you know that we have long been opposed to subscription. We have always worried that it will erode the perceived value of your books. Though this significant long-term risk remains, we have decided to test subscription in the coming weeks.
Translation: Be prepared to make even less money. And we're doing this even though we're concerned the perceived value of your books will drop, something often pointed to as the reason we've kept ebook prices high. So we're hypocrites. But it's okay, because we're trying to save ourselves.Several companies offer “pay per read” plans that offer favorable economic terms. We plan to try subscription with backlist books, and mostly with titles that are not well represented at bricks and mortar retail stores. Our job has always been to provide you with the broadest possible distribution, and given the current financial and strategic incentives being offered, we believe the time is right to try this test.
Translation: If we can't get your paper books into stores (you remember paper books; that's the reason you signed a contract with us) we'll stick them in a subscription service. And you have no say so in this decision, because we own you.

Joe sez: If you self-publish, you maintain control over opting into subscription services. But the thing that blows my mind here is how nonsensical Macmillan's approach is. For years they wanted to control ebook pricing because they're justifiably concerned that low ebook prices will eat into paper profits. So rather than lower ebook prices across the board, they're going to allow readers to get them for a monthly subscription fee.

Whaaa? Doesn't this go against everything Macmillan has been fighting for?

Up to this point, they've at least been consistent in their stupidity. If this doesn't reek of throwing their authors under the bus, I don't know the definition of the term.

I remain entirely optimistic about our prospects together as we go forward.
Translation: Macmillan's prospects. Not the prospects of our writers.

Macmillan owns your rights, and we can do whatever the hell we want with them, and you have no say in it because you signed those rights away to us. Your rights are our sole assets.

We haven't exploited your rights like we should have, because we were looking at the long game. Ours, not yours.

Looks like the long game won't pan out. So we're changing strategies.

You'll undoubtedly suffer because of this. But you're used to suffering because of the poor decisions we've made.

Hey, at least we're warning you, right?There is plenty of complexity to tackle, but with it will come great opportunity.
Translation: Opportunity for Macmillan. Not for you. You're trapped, and can't do anything about it.As always, please be in touch with any questions or concerns.
Joe's questions for John Sargent on behalf of Macmillan authors:

1. Can I opt out of this new subscription idea?

2. My books aren't available in print anymore, or the print sales are minuscule. Can you give me my rights back?

3. Why do you think low ebook prices are bad, but a subscription service is a great opportunity?

4. Couldn't you forsake this subscription idea, and just lower my ebook prices?

5. After the price-fixing suit and the millions of dollars in lawyer fees and damages, why do you still have a job?

6. I'm unclear: are you only pursuing this subscription model with Amazon's competitors? Or are you going to also enroll my ebooks in Kindle Unlimited? If so, doesn't that negate everything you've done previously? If not, and you put my ebooks into Scribd or Oyster or wherever, will my ebooks still be sold on Amazon? Or will you pull them from Amazon?

8. Are you going to publicly share the royalty percentages, and the author share, of these subscription deals when they go live? Or will I have to wait for me next royalty statement, six months from now, and then try to figure out the gobbledygook myself?

9. Can you explain how both the agency model and the subscription model are good for me, and can co-exist?

10. You said that this is for books that "are not well represented at bricks and mortar retail stores". Does that mean no Macmillan bestsellers will be in this subscription program? The rich authors don't have to deal with this, but I do?

11. I still sell some paper books, but not a lot. Won't bookstores be mad if they're selling my paper book, but readers can get that same book for free via subscription service?

12. Are you planning to let my paper books go out of print so you can put them into this subscription service?

13. Can you clearly explain why it is okay that Amazon discounts my paper books, but not okay if they discount my ebooks?

14. You said there is a long-term risk that this will devalue my titles, but you're testing it anyway. Are you going to compensate me in any way to be your guinea pig? A bonus? Higher royalties? Some sort of promotion that features my titles?

15. I didn't sign a contract with Macmillan for them to put my titles in a subscription service. What's my recourse?

16. In the same letter, how can you brag that Amazon is no longer allowed to discount Macmillan ebooks, and then state that readers will be able to get my books under a subscription model for an arguably much greater discount? Don't you see how much worse that is than discounting? Don't you see the hypocrisy?

17. A lot of self-pubbed authors are unhappy with Kindle Unlimited because they're earning less money. Now you want to force me into similar subscription programs. Do you see my income increasing because of this decision? Because the blogosphere is full of complaints that subscription services aren't author-friendly, and I'm very concerned.

I encourage Macmillan authors to take Sargent up on his offer to contact him with questions. As far as I can tell, he didn't actually give authors any way to get in touch with him in the letter he posted, but I'm sure all Macmillan authors already have his email address. He emailed you this letter, right? I mean, if he didn't, then this looks less like true concern for authors, and more like a publicity stunt to head off a shit storm. Post in public that the bug is actually a feature, before the unwashed masses start to whine.

If I missed any questions for John, put them in the comments and I'll add them to this list.